General Assembly passes tax hike in final hours

In-state tuition for immigrants and utility regulations also OK’d in final stretch

The Gazette
April 12, 2011
by Sarah Breitenbach, Margie Hyslop and Alan Brody

ANNAPOLIS — With a little more than an hour left in the General Assembly session Monday night, legislators finalized a proposal to hike the sales tax on alcohol, directing revenues to Marylanders with disabilities and public school construction.

The tax increase was among several measures passed in the waning hours of the session, including a plan that imposes higher penalties for electricity companies that fail to meet strict reliability standards and a move to grant in-state tuition to illegal immigrants.

The alcohol tax, which will increase from 6 percent to 9 percent July 1, was batted back and forth between the chambers in the past week, eventually turning into a pair of bills that separately directed $15 million to reduce the waiting list for people with developmental disabilities in need of assistance and moved money into the state’s school construction fund.

The state’s capital budget had included $250 million for school construction, but the tax revenues are expected to generate another $47.5 million for school infrastructure, including $9 million for Montgomery County.

Vincent DeMarco, a lobbyist and president of the Maryland Citizens’ Health Initiative, championed the tax prior to the November election. He and legislators initially wanted to increase the alcohol excise tax by 10 cents per drink.

That move would have funded more programs for people with mental health challenges, physical disabilities and addiction.

Increasing the sales tax is a better outcome because raising the excise tax is static, DeMarco said. Sales tax revenues will go up with inflation and therefore generate more revenue, he said.

“In these times of tough budget problems, other states should do what Maryland did, raise money in a way that saves lives,” DeMarco said. “This alcohol tax increase will save many lives and raise enough money to fund critical health care and community service needs.”

Sen. E.J. Pipkin (R-Dist. 36) of Elkton said the decision to add school construction dollars to the plan was politically motivated and offered an amendment to change the distribution of funds across the counties.

“When it comes to education, there’s usually a process,” Pipkin said. “There’s no process here. It’s what is politically expedient.”

Earlier Monday, House Republicans vehemently objected to what they called a rushed process that silenced the voices of the minority.

“We need to stop this tyranny of the majority that takes place,” said Del. Michael D. Smigiel Sr. (R-Dist. 36) of Chesapeake City.

Also in the final hours, lawmaker adopted the Dream Act, which guarantees in-state tuition to illegal immigrants who attend a Maryland high school for at least three years and can prove their parents paid income taxes for at least three consecutive years.

The bill remained in question midday Monday after the Senate opposed House changes that would have provided an exception to the income tax requirement. Eventually, that provision was dropped from both versions of the plan.

“We think it helps these young people who finish high school to have something to work for,” said Sen. Paul G. Pinksy (D-Dist. 22) of University Park, the bill’s floor leader.

Electric utilities also saw their regulations changed toward the end of session and now will have to meet defined standards for reliable and safe power distribution or face fines.

The Public Service Commission would have to set objective standards by July 1, 2012. Utilities also would have to meet standards for communicating with customers about when their power would be restored.

Failure to meet the standards could result in a fine of up to $25,000 per violation per day, a compromise two and half times the $10,000 maximum the House had approved but below the ceiling of 2.5 percent of a company’s most recent annual revenue for transmitting and distributing electricity that the Senate wanted.

The legislation also repeals a $50,000 cap on fines for serious violations.

Fines could be assessed immediately in cases now before the PSC, including its ongoing investigation of Pepco’s performance that began after massive outages during the winter and summer of 2010 left thousands of customers without power for days.

Earlier, the House had backed delaying penalties until July 2014.

The legislation was part of Gov. O’Malley’s agenda, and he is expected to sign it into law.

In the final minutes, the House and Senate also signed off on legislation to require the Maryland Jockey Club and Rosecroft Raceway to reach an agreement to simulcast races at other racetracks in order to receive state subsidies.

“If we wanted to have year-round racing, we had to pass that,” House Speaker Michael E. Busch (D-Dist. 30) of Annapolis said following the midnight adjournment.